Conversant (Formerly ValueClick) On The Uptick For Now

Following a rough year, Conversant – the ad-tech company formerly known as ad network ValueClick – had what CEO John Giuliani described in the company’s quarterly call as a “solid Q4 to close out the year.” Read the release.

The company on Tuesday announced 2013 Q4 revenue of $176.4 million, a 6% increase from the same period last year ($166.6 million). This brings its 2013 annual earnings to $573.1 million, a recovery of sorts.

“We didn’t expect to go backwards last year,” Giuliani said. “We did, but we pulled out of that and we continue to perform better and better. Clearly our work isn’t done yet, but our goal is to produce a unified, differentiated offering and we believe we are well on our way.”

The company’s down period occurred largely because of declines in its once-core display ad business (which Conversant calls “insertion order-driven display business"). This area continues to decrease. However to stabilize itself, Conversant changed the way it segments its lines of business, distinguishing affiliate marketing revenue (from its Commission Junction unit) from media revenue. Media revenue lumps together the company’s various CRM, mobile, video and cross-channel technologies business along with its traditional display business.

In the short term, this reorganization appears to be working. Though Conversant’s Q4 2013 media revenue was affected by the decline of display advertising, the company reported $127.4 million, a 4% quarterly increase (the annual total for media revenue was $410.4 million for the year, a 5% increase). But is this newfound stability sustainable?

Conversant CFO John Pitstick said that Q4 saw normal seasonal trends from Q3 to Q4, “and that’s indicative of a business that’s on the right track.”

Conversant’s affiliate marketing revenue performed impressively in Q4, bringing in $49.1 million, a 12% increase from the same period last year, driven by new client wins. Fiscal year 2013 had affiliate marketing revenue at $162.9 million, a 9% annual increase. However, Pitstick alluded that this growth will soften in Q1 2014, anticipating only a 4% revenue growth rate – a number that the financial analysts on the call thought was slightly low.

“We’re seeing softness in the ecosystem in terms of transactional volume,” Pitstick said. “And some clients reducing or eliminating coupon or deal offerings. Some of those changes flow back to us in terms of overall volumes we see. We do from time to time have client losses we digest. Those play into Q1 guidance.”

In terms of debt, Conversant had a total of $140 million as of Dec. 31. Q4 saw a reduction of its debt balance by $55 million, and the company cautioned that its balance sheet doesn’t include the $80 million proceeds from the divestiture of its owned and operated (O&O) sites. The company expects cash flow in 2014 to improve by using tax benefits from the divestiture to reduce the tax burden by an additional $40 million.

2013 was a massive year for Conversant. Following a down year, the company jettisoned its O&O business, rebranded from ValueClick (which cost $3 million to launch) and most recently acquired digital video technology provider SET Media.

Despite having restructured in the past, Giuliani tried to assuage potential concerns during the call that this was more of the same: “We’re very happy with the infrastructure we’ve put in place,” he said. “We tried in the past, but [this time] we put in the infrastructure leadership first. That’s the foundation for bringing on high-quality sales professionals.”